The head of Caterpillar, the world's largest maker of earthmoving equipment, said on Wednesday the U.S. economy is probably in a recession and is unlikely to start recovering until late this year.
Caterpillar Chairman and CEO Jim Owens said fiscal stimulus would help support an economy dogged by mortgage foreclosures, a steep drop-off in residential construction and financial market turmoil triggered by the subprime loan crisis.
"The U.S. economy is probably in recession now but will likely have real growth this year of around 0.5 percent, so very very slow growth and probably a couple of quarters of negative growth," Owens said.
He made the comments at a news conference in Tokyo to announce plans to raise Caterpillar's stake in a Japanese joint venture with Mitsubishi Heavy Industries.
Caterpillar is eager to expand in Asia, where it trails local competitors such as Komatsu, and as a slowdown in the U.S. economy dampens the outlook for construction equipment demand in its home market.
"By having a majority ownership of the joint venture, we can do a better job in integrating our manufacturing presence throughout the (Asia-Pacific) region," Jim Owens told a news conference.
Caterpillar currently owns 50 percent of Shin Caterpillar Mitsubishi (SCM), a joint venture formed 44 years ago that sells and produces Caterpillar brand hydraulic excavators, wheel loaders and bulldozers.
Under the agreement, SCM will redeem half of Mitsubishi Heavy's stake in the joint venture, Mitsubishi Heavy said.
It also had an option for the redemption of the rest of its stake five years later.
Mitsubishi Heavy said it expected to book a one-time gain of some 14 billion yen ($139.7 million) from the sale in the business year starting on April 1.
Mitsubishi Heavy, which is preparing to launch a 150 billion yen regional jet project, said it will focus its resources on core business operations.